Author: Ari Good, JD LLM

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Tax Considerations For Inbound Investors in US Property

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Come one come all

Tax Considerations for Inbound Investors in US Property

Foreign Investments In US Real Estate

The United States has enjoyed a resurgence in foreign money coming to our shores to invest in stocks, businesses and, perhaps most of all, real estate.  Whether this is to scoop up real estate deals or simply find a safe place your money a key first step is proper tax planning.  The tax code provisions dealing with such “inbound” investments are very complicated and there’s always a lot of variables at play.  Key considerations include the type of property you want, for how long you want to hold it, and what type of income you expect it to produce.  While there is no substitute for professional advice here are some key concepts to keep in mind.

Regulations for Regulations

Be prepared to answer a number of questions dealing with who you are, where you’re from and where you got your money, especially if you are borrowing from any “financial institution” as part of the deal.  The United States government, particularly the IRS, has for years tightening the noose on international banking and trade.  Opening bank accounts or forming companies in many cases require you to complete “know your customer” style questionnaires asking about all manner of things including who will be the beneficial owners of your investments.  Unfair as it may be this is even more difficult if you come from a country that shows up on certain lists, such as the OECD “gray list” of countries deemed uncooperative in sharing bank account and tax information, or the Financial Action Task Force (FATF) “black list”, a list of countries deemed not to be doing enough to combat money laundering.  In the end, however, you can still achieve a measure of asset protection and anonymity by selecting the right entity and tax structure that will protect you while still keeping you in compliance with the thicket of regulations.

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Moving your money

Withholding Your Money

The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) was designed to prevent foreign investors in US real property from selling and taking their proceeds abroad without paying tax.  At the time there was no way at the time for the IRS to collect tax from people who did not have a presence in the US other than the property they sold.  FIRPTA changed this by putting the burden on the buyer (or other transferee) to withhold part of the proceeds of the sale (10% as to individuals) to put against any tax liability the foreign buyer may have.  Typically it is the settlement officer / escrow agent who would bear this burden.  The burden is even higher (35%) for a foreign corporation that sells a US property and then sends the proceeds to the corporation’s shareholders.  Again, though, fortunately, going about both the buying and the selling the right way can reduce or even eliminate FIRPTA obligations.

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Your silent partner

Your United States Tax Return

I would be hard pressed to think of one of my foreign investor clients who wants to get into the messy business of filing a US tax return.  There are options, however.  Even if you have to file a US tax return that doesn’t mean that you have to do so individually, rather, there are corporate structures that allow you to limit what “you” have to report to the business of that entity.  Second, in real estate it sometimes makes sense to consider yourself to be “effectively connected” to the United States and file a US return.  These are just words that mean that in the eyes of the law you are, in summary, doing business here and agree to file a US tax return.  The upside of this is that you are then able to fully deduct your expenses like property maintenance, interest expense, taxes and fees from your gross rents or spec properties.

Contact Us For Help

No matter what path you follow it is essential that you do it right the first time.  This requires careful attention to all of the filing and election requirements.  Failing to do this correctly could cost you some or all of your profits on the deal.  I am here to help.

Ari Good, Esq.

(786) 235-8371

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Recording Industry Contracts – What To Look For

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Negotiate your recording industry contract

The Ins and Outs of Recording Industry Contracts

One of the most exciting moments in an artist’s career is when he or she receives his first recording contract.  This can represent your  “big break” and an opportunity to market your music and gain more fans, followers and ultimately sales. The smart artist carefully reviews his contract before committing to any music marketing company, recording industry contract, or other agreement.  This is extremely important.  Committing yourself to the wrong contract can limit your artistic freedom, obligate you to produce a nearly impossible amount of music in a short period of time, and restrict you from working with your favorite musicians or producers. Here is a list for some common things to look out for:

Your minimum recording commitment

In summary, your minimum recording commitment (or “MRC”) spells out how much music you have to produce for the marketing company or record label in exchange for their services.  The MRC can be phrased in terms of the number of singles or number of albums, or sometimes both.  Have a good idea based on your experience of how long it takes you to produce a song or album.  You  will need to have enough time to create a quality product without sacrificing your artistic integrity, which is what brought you the contract in the first place.  The timeframe for meeting your MRC can often be pretty tight, which brings us to our next point:

The Recording Industry Contract Term

Rather than being for a year or for a certain number of albums, many recording industry contracts create several back-to-back terms that obligate you to meet your MRC within each term.  These can be as short as six months.  The contract typically gives the label or marketing company the option, but not the obligation, to cancel or renew the contract at the end of the each term while keeping the work you have produced thus far.  This often a pretty one-sided deal.  You may not have the same right to cancel if you’re unhappy with the relationship.  Ideally you would want either one of you to have the option to cancel the relationship after each successive term or extend the whole term in the recording industry contract so there is more of a mutual commitment.

Getting a Win-Win Deal

You scratch my back I’ll scratch yours as they say.  Many recording industry contracts are pretty thin on detail when it comes to what exactly the record label or marketing company will do for you.  You should have a very clear idea of what you want out of the deal and how the company plans to give it to you.  Are you looking for social media promotion?  Bookings?  Paying for your production and CD costs?  Perfecting your listings on iTunes, submitting your material to Spotify and Pandora and registering you with the performing rights organizations?  These are all critical parts of marketing your music.  Keep in mind too that most of the money in the music industry is made in live performances and merchandising rather than unit sales.  Be aware of  smaller companies that claim to have hot “industry contacts”.  Such companies often claim that they’ve worked with big artists and launched their careers.  Obviously these claims may be true, and this might be a great relationship for you, just be aware of claims that are very hard to prove.  Do your homework. What does their website look like?  How long have they been in business?  Exactly which artists having worked with and is their name on those artists websites or CDs, etc.

Music Industry Relationships and Leverage

Always know who has more bargaining power in any relationship.  If you’re looking at a contract from Virgin Music or Sony, suffice it to say that there’s probably not a whole lot you can do in terms of negotiating terms, and you are probably lucky to have such an opportunity.  If you’re dealing with a smaller company though, know that they might be hungry just as you are, and you may have more power negotiating terms if you already have an established fan base, merchandising relationships, and other things going for you that make you easier to market.  It’s sort of like the joke about getting a loan – the only people who get them are those who don’t need them.  The best contracts go to artists that have already done a lot for themselves and already have a following.

Getting the right advice in advance can make the difference between hitting it big and ending up with an impossible situation.  Call me for consultation and contract review.  A little good advice and perspective at the beginning can save you a lot of headaches down the road and open you up to  win-win deals that will deliver what you’re really looking for.

Ari Good, Esq.

(786) 235-8371

Detroit’s Lawyers Defend Billing

In court papers, lead law firm Jones Day and others that helped Detroit navigate its historic debt restructuring made a case—at the request of U.S. Bankruptcy Judge Steven Rhodes—for why their hourly billing rates and final tab are reasonable. Officials at Jones Day, who pointed out they had already cut $17.7 million from their tab, defended the $53.7 million in fees charged for roughly 17 months’ work.

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Real estate attorney Bill Kuehling

Bill advises developers, nonprofit corporations, and public entities on a variety of real estate transactions and infrastructure finance. He has more than 20 years of experience in real estate development, public/private partnerships, land use, and municipal law, and serves as an advisor to national developers seeking tax abatements, tax increment financing, or any other redevelopment opportunities across the St. Louis region.

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